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Credit Cards / Re: FYI: Tax Court rules that points from certain MS are taxable.
« on: February 24, 2021, 11:35:07 AM »Bloomberg Law News 2021-02-24T10:13:14621-05:00They seem to be reading it differently than me.
IRS Wins in ‘Extreme Test’ of Credit Card Reward Tax Status
By Jeery Leon 2021-02-23T17:05:24000-05:00
The IRS can tax more than $300,000 in credit card rewards because they were used to purchase prepaid
debit cards and money orders rather than goods or services, the U.S. Tax Court ruled.
Konstantin Anikeev and Nadezhda Anikeev used their credit cards and prepaid gift cards to purchase
money orders which they then deposited into their bank accounts. The rewards they reaped through their
credit cards alone aren’t includible as income, the Tax Court said, adding that the case is an “extreme test
of the longstanding nontaxability of credit card reward programs.”
But the gift cards and money orders are cash equivalents—an “accession to wealth” under tax code
Section 61, Judge Robert Goeke said in his opinion, siding with the IRS. Goeke said the holding is based on
the fact that money order purchases and debit card reloads are incompatible with an IRS policy that
allows credit card rewards for the purchase of goods and services to be excluded from income.
The IRS determined deficiencies of about $103,000 for 2013 and 2014 and argued the pair should have to
recognize $312,046 in additional income stemming from the rewards.
The Anikeevs had alleged that the gift cards are goods and services and their subsequent use is irrelevant.
The IRS had argued the gift cards should be treated like cash because they were used to purchase money
orders.
Goeke said the court hopes that the IRS in the future polices its policy “in regulations or public
pronouncements rather than relying on piecemeal litigation.”
Jeffrey M. Sklarz of Green & Sklarz LLC, representing the Anikeevs, and the IRS didn’t immediately respond
to requests for comment.
The case is Anikeev v. Commissioner , T.C., No. 13080-17, 2/23/21 .
To contact the reporter on this story: Jeffery Leon in Washington at jleon@bloombergindustry.com
To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com;
Colleen Murphy at cmurphy@bloombergtax.com
